Consistent, reliable chemistry is fundamental for any base oil customer. Companies often talk about security, but how can you be confident that the specialty oils you rely on will not only remain consistent, but that they will be available years or even months from now?
Over more than 40 years in the refining industry, Ergon has learned valuable lessons about ensuring a secure supply for customers around the world. The company is sharing lessons learned to help you prepare for challenges that will no doubt arise due to regulatory demands and an evolving market.
Family owned and operated, Ergon began in 1954 in a one-room building in Jackson, Mississippi, USA, in the petroleum industry’s service sectors. The company has since grown to an organization
that spans numerous industries and countries around the world, with corporate offices in the Americas, Asia and Europe. With both naphthenic and paraffinic refineries and a global distribution network, Ergon’s specialty product lines include HyGold Base Oils, HyPrene Process Oils, HyVolt Transformer Oils, and HyPrint Ink Oils.
Most major refiners are in the business of producing fuels, and specialty oils are a byproduct of their primary business. As little as 1% of their barrel of crude goes toward specialty oils. Ergon’s naphthenic refinery has been built to produce 80% specialty oils.
A raw material wake-up call.
Ergon experienced a raw material shift in the late 1990s, similar to the one many refiners are facing in today’s volatile market. The realization that dependence on a particular type of crude had the potential to leave them unable to meet customer demand prompted an overhaul of Ergon’s crude outlook and significant investments in their crude evaluation program and processing capabilities.
“What Ergon offers customers goes beyond oil,” explained Chris Marquette, Senior Vice President of Ergon’s Petroleum Specialties Marketing Division. “We are offering security around their production. Ergon’s products are a component in production all over the world, in some of the largest demand centers, and that security is crucial. Through this process, we have learned that there is one fundamental question that every one of our customers wants answered … Is my base oil supplier securing my needed chemistry?”
How can you measure your base oil supplier’s expertise in specialty crudes?
All crudes have a life cycle, and fields are constantly in a state of decline. As fields age over time, their chemistry changes. A desirable supplier is one with a raw material evaluation program that can adapt quickly and accurately to test a diverse collection of crudes, no matter where they are sourced or what size the field might be.
Ergon has built a multidisciplinary team that is continuously working to identify potential specialty crudes around the world, extensively testing and characterizing crudes through an agile in-house raw material program. Investments made in these processes allow for rapid turnaround of complex and extensive crude evaluations that would take as long as six months if performed by a third party.
Is your supplier making continued investments to prepare for the future?
Shifts in crude availability and regulations on products have led to a significant number of refinery closures globally, with more on the horizon. The mixture of refineries has changed as well, due to the fact that the sustainability of a refinery is linked to crude availability.
As a family-owned company, Ergon has a track record of reinvesting, which has helped the company remain reliable and positioned them well to take advantage of the shifting crude and regulatory landscape.
Does your supplier’s logistics infrastructure allow for sufficient crude access?
Historically, refinery locations were determined by geography, built to capitalize on nearby crude fields. As those fields declined, refiners have been forced to make additional investments to source crude from farther away. An adequate logistics network gives refiners access to sufficient crudes of the right chemistry, along with the ability to balance declines in supply.
As the world’s largest manufacturer of specialty naphthenic oils with a production capacity of 1,200,000 MT/Year, Ergon maintains a network of strategically located terminals, allowing for efficient and secure worldwide supply. The company is able to source both domestic and globally available crudes through an integrated midstream company, utilizing its crude purchasing, terminaling, trucking and barging assets to gather specialty crudes.
The Ergon enterprise started with trucking services in 1954, and drivers currently log over 25 million miles each year. The company’s inland waterways petroleum transportation fleet, established in 1968, is one of the largest in the United States.
What is your supplier’s long-term outlook on raw materials?
A refiner should be able to offer a clear link between their investment strategy and their crude outlook. It takes both understanding and action to provide security. Crude disruptions and crude changes are very capital intensive and must be planned many years in advance. If planning is not executed properly, the result is disruptive, and refinery closures can follow.
Crude fields will continue to decline, and crudes will be excluded based on logistics, processing traits, yield structure and availability. Refineries will be forced to process crude options that previously had not been optimal.
Ergon has continually invested to stay ahead of the curve and maintain raw material flexibility and security.
A company centered around service.
“In a world heading toward commoditization, Ergon strives to provide something different … greater value through service,” commented Lance Puckett, President of the Ergon refineries. “So much of our business is servicing the customer. To do that effectively, you have to have product, but you also have to have a good, qualified team to meet the expectations of the customer.”
In order to support the company’s long-term plan to expand throughout Asia, Ergon has built a very capable sales force and customer support team with offices in Singapore and Indonesia, led by Per Dahlstedt, Managing Director of Ergon International.
“The foundational principles on which Ergon was formed are ‘Meet Needs, Support Families, Serve Customers,'” Puckett said. “This concept, inspired by our founder many years ago, is reflected in all of our business activities and permeates our culture. Ergon’s success is based on our desire to exceed customers’ expectations and needs.”
For more information about market trends and lessons Ergon has learned over the years, please contact our team at the numbers below.
Asia + 65 68081547 | Europe, Middle East, Africa + 32 2 351 23 75
North & South America +1 601 933 3000